First Piedmont Bank & Trust Co. v. Doyle

• Decision Date: 13 July 1976
• Docket Number: No. 11956,11956
• Citation: 551 P.2d 1336,97 Idaho 700
• Parties: , 19 UCC Rep.Serv. 1189 FIRST PIEDMONT BANK AND TRUST COMPANY, Plaintiff-Respondent, v. James DOYLE, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 1336

551 P.2d 1336

97 Idaho 700, 19 UCC Rep.Serv. 1189

FIRST PIEDMONT BANK AND TRUST COMPANY, Plaintiff-Respondent, v. James DOYLE, Defendant-Appellant.

No. 11956.

Supreme Court of Idaho.

July 13, 1976.

James L. Kennedy, Jr., of Walker & Kennedy, Twin Falls, for defendant-appellant.

E. Lee Schlender, of Schlender & Young, Ketchum, for plaintiff-respondent.

SHEPARD, Justice.

This is an appeal from a summary judgment in favor of the plaintiff bank in an action it brought against James Doyle, the guarantor of the debts of Mecco Unlimited, a corporation.

In late 1971 and early 1972 appellant-defendant Doyle signed two unconditional guarantees for any debts Mecco might owe respondent-plaintiff bank up to an amount of $4,400. Thereafter the bank honored overdraft checks by Mecco totalling $1,376 and extended credit on Mecco's credit card account in the amount of $3,309. Mecco failed to pay bank upon demand and thereafter the bank brought this action against Doyle as guarantor in 1974.

Plaintiff bank moved for summary judgment on the basis of documents establishing the above facts. Doyle did not controvert those facts but instead interposed a defense of setoff. Doyle's documentation in opposition to the motion for summary judgment indicated that the oridinal agreement establishing Mecco's checking account at the bank had included as authorized signators one Bozick, Mecco's then executive vice-president. On October 17, 1972, it is stated that Bozick's employment with Mecco was terminated, that one of the employees of the bank was advised of Bozick's termination of employment and the bank was requested to remove Bozick's name as an authorized signator on Mecco's checks. Some three weeks later on November 6, 1972, the plaintiff bank honored a check on Mecco's account for $20,000 payable to 'Mechanical Blends System' and signed on behalf of Mecco by Bozick. In response thereto the bank furnished additional documentation asserting non-receipt of any advice of the employment termination of Bozick prior to the time it honored the check written by Bozick.

Summary judgment was granted plaintiff bank in the amount of the guarantee, $4,400, plus interest and costs. In essence, the trial court held that an oral request to strike the signature of an officer from a corporation's checking account signature card constituted a 'stop payment order' within the meaning of I.C. § 28-4-403. That statute provides that oral stop payment orders are binding only for 14 calendar days and thereafter must be confirmed in writing. The court held that no genuine issue of material fact existed since the record revealed that the check in question was written and honored three weeks after the oral notice.

We hold that the district court erred in rendering its decision and ordering summary judgment on the basis of a 'stop payment order.' A stop payment order as the name suggests is a countermand to a previous valid order to draw money from the depositor's account. See I.C. §§ 28-4-103(1), 28-4-104(1)(g); White & Summers UCC (2d ed. 1972) § 17-5, p. 577; Bailey, Brady on Bank Checks (4th ed. 1969), p. 345. The focus of a stop payment order is on the particular item or items drawn in favor of specific payees and concerns particular transactions but is not concerned with the drawer's authority to write the check. While the statutes deal with oral and written stop orders, ultimately a written order is required within 14 days following oral order. See, I.C. § 28-4-403, Comment 6; I.C. § 28-4-403(2), Comment 7; Hawkland, Stop Payment Orders Under the Commercial Code, 75 Commercial Law Journal 53 (1970).

Revocation of authority to execute checks is, however, not a countermand to a previous payment order and therefore not a stop payment order. It is rather a modification of the agreement between the bank and the depositor as to who is authorized to execute instruments for the purpose of drawing funds from the depositor's account.

Although a common sense approach would recognize the desirability of a written notice of termination of authority to execute instruments, such is not explicitly required under the Code. In the absence of such specific provision general rules of principle and agency are held to apply. I.C. § 28-1-103. Under the common law notice of termination of an agent's authority to act on behalf of a principle in the absence of a controlling contractual principle could be given orally. See, Restatement, Agency 2d, § 136(1)(a); Seavey, Law of Agency (1964) § 51F., p. 95. In the instant case, however, the agreement between the depositor Mecco and the bank required revocation of signator authority to be in the form of a written corporate resolution. On the other hand, 'no agreement can disclaim a bank's responsibility for its own lack of good faith or failure to exercise ordinary care.' I.C. § 28-4-103(1). Ordinarily, the controverted question of fact as to whether the bank did or did not receive the oral notice of withdrawal of signatory authorization would present a material issue of fact which would preclude summary judgment since there might be an issue as to the bank's failure to exercise ordinary care in the face of the oral revocation of signatory authority, albeit written revocation was required by the agreement. See, Indianapolis Saenger Chor, Inc. v. Fletcher Nat'l Bank & Trust, 149 Ind.App. 665, 274 N.E.2d 728 (1971); Wagner Trading Co. v. Battery Park Nat'l Bank, 228 N.Y. 37, 126 N.E. 347 (1920); Susquehanna Lines v. Auditore, 223 App.Div. 585, 229 N.Y.S. 181 (1928); Bank of Giles County v. Fidelity & Deposit Co. of Maryland, 84 F.2d 321 (4 Cir., 1936); Farmers Bank of Alamo v. United States Fidelity & Guaranty Co., 28 F.2d 676 (5 Cir., 1928); Gendler v. Sibly State Bank, 62 F.Supp. 805 (D.C.1945).

Upon motion for summary judgment all factual issues must be resolved in favor of the non-moving party, as well as all reasonable inferences which may be drawn from said facts. IRCP 56(c); Stoddard v. AID Ins. Co., 97 Idaho 508, 547 P.2d 1113 (1976); Jacoby v. Capaldi, 93 Idaho 39, 454 P.2d 602 (...